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Samsung Electronics Chairperson Lee Jae-yong leaves the Seoul Central District Court on Feb. 5 after being acquitted of stock manipulation in a case related to the merger of two Samsung affiliates. (Kim Yeong-won/The Hankyoreh)

A Seoul court has acquitted Samsung Electronics Chairman Lee Jae-yong of all charges of stock manipulation and accounting fraud related to the 2015 merger of Samsung C&T and Cheil Industries Inc. In its verdict, the Seoul Central District Court declared that the sole intent of the merger was not to consolidate Lee’s control over the Samsung conglomerate, and the merger ultimately benefited both Samsung C&T and its investors.

Although the Supreme Court had already acknowledged the illicit nature of the merger and pronounced Lee guilty of bribery in relation to the merger, the Seoul court saw these charges as a separate issue.  

Lee was charged with participating in unfair trade practices and market manipulation (violations of the Capital Markets Act), breach of trust, and interfering with a third-party evaluation of the firm. The court declared, however, that the prosecution had failed to prove any of the charges, pronouncing Lee not guilty. 

The verdict comes nearly three and a half years after Lee was indicted on Sept. 1, 2020. During Lee’s final trial on Nov. 17 of last year, prosecutors requested a sentence of five years imprisonment, coupled with a fine of 500 million won (US$375,689). The court also acquitted 13 other Samsung executives, including Choi Gee-sung, the former head of the now-disbanded Future Strategy Office, and two others affiliated with the office. 

In 2015, prosecutors alleged that Lee conspired to merge Cheil Industries, in which he was the largest shareholder (23.2%), and Samsung C&T (in which Lee had no shares) through illicit means with the aim of becoming the Samsung Group’s successor at the lowest possible cost. The blueprint for the merger was laid out in a Future Strategy Office document called “Project G.” During the merger, Cheil shares shot up while Samsung C&T shares went down. To achieve this effect, prosecutors alleged that Lee manipulated stocks, forged accounting records, and made false corporate announcements.  

Yet the court declared that there was nothing illegal about the merger, claiming that “it’s difficult to verify that the main purpose of the merger of Samsung C&T and Cheil Industries was to solidify Lee’s control over the Samsung conglomerate and take over as successor.”

“Reviewing measures to solidify a conglomerate’s control over its affiliates or to increase the firm’s efficiency is a completely natural, even necessary, part of an executive’s job,” the court added. 

Regarding charges that Lee breached trust by hurting Samsung C&T shareholders, the court said that stabilizing the management of the Samsung Group “benefits both Samsung C&T and its shareholders.”  

People's Solidarity for Participatory Democracy, the activist group that tipped off prosecutors about the merger in 2016, released a statement denouncing the verdict. 

“Lee was found guilty of bribery and punished accordingly, but apparently there was no purpose behind that bribe,” the statement said. 

“A court that completely ignores prior verdicts and acquits a guilty defendant is basically turning a blind eye,” the statement continued. 

An official with the Samsung Group reacted to the verdict by saying, “Amid a rapidly changing global environment, management decisions are of critical importance. Fortunately, the verdict has allowed us to focus on the business.”

By Lee Jae-ho, staff reporter; Hong Dae-sun, staff reporter

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